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Each day of our working lives brings us closer to retirement. Although that date may change as we near the end date – we may be encouraged to work longer, or we may be forced to finish before we were ready. It’s important to plan for the time where we will be drawing on your superannuation rather than contributing.
We typically have a number for our superannuation balance as a financial goal, but just how much should you plan to have in super now, and when you retire?
Above or below average?
Assuming you’ve been in the workforce for a few months, years or even decades, your retirement savings will be growing nicely thanks to the Super Guarantee. This is the compulsory contribution to super your employer must pay on your behalf, currently 11.5% of your salary but increasing to 12% from 1 July 2025. You can keep tabs on just how much you have by checking your latest super statement, logging on to your MyGov account, or your super fund’s online portal.
Once you’ve checked up on your super savings, how can you tell if it’s enough to see you living comfortably in retirement, whether that’s in 5 or 25-years’ time? The Association of Superannuation Funds of Australia (ASFA) has published a guide on whether you are on track to achieve a comfortable retirement. For example, for those born in 1980, ASFA suggests your current balance should be close to $213,000; for those born in 1970 you should be hovering around $361,000, and if you were born in 1960 the figure is $549,000.
How much is enough?
The ASFA standard, however, isn’t necessarily going to allow you to live the lifestyle of your choice. You might want to have more holidays, a bigger entertainment budget or just to be able to help your family or upgrade your car and home regularly.
Putting a figure on how much you’ll need saved to cover your costs in retirement is a tricky task. There are so many unknowns for each of us, including when we’re going to retire, how long we’ll live once we do and what we’ll be spending our time doing. This is why many people seek advice from a Certified Financial Planner® professional to get financially ready for retirement. They can ask the right questions and help you run the numbers to give you a clear picture of your retirement goals and plan for the income you’ll need to achieve them.
To get a more general idea of what you can expect to spend in retirement, the ASFA publish retirement standard figures each quarter. As a well-researched estimate of what singles and couples will need to pay their bills for a modest or comfortable retirement lifestyle, these figures offer a rough idea of living costs.
Having said this, results from the 2017 FPA Live the Dream survey show that just 22% of baby boomers say they’re living the dream in retirement. And the number one obstacle standing in their way is a low bank balance (39%). So while a modest income may be enough to live on, perhaps a bigger nest egg is important for making retirement dreams come true.
Should I save more?
As well as these different estimates about how much you’ll need in retirement, here are some important ideas to bear in mind if you’re uncertain about the importance of topping up your super with extra contributions:
- Not only is Australia’s population getting bigger, it’s ageing too. As a nation that’s very successful at living longer, we’re likely to be retired for longer and need extra savings as a result.
- Current ASFA retirement standard figures assume you’ll have no rent or mortgage to pay in retirement. However, there are widespread concerns about growing numbers of people heading towards retirement still paying off a substantial home loan or continuing to rent for the rest of their lives. This creates a significant extra cost to cover from retirement income.
- The gap between median superannuation balances men and women aged between 60 and 64 in 2024 was $53,190, a difference of more than 25%. As women are far more likely to take on unpaid care roles, and stop working or work part-time as a result, they also have less opportunity to build up retirement savings from SG contributions. Whether you end up taking a break to study, travel or look after family members, consider making up for missed SG payments with extra contributions now.
Top tip: Salary sacrificing into super can be a great way to cut your tax bill and boost your super contributions at the same time.
The Money & Life website is operated by the Financial Advice Association (FAAA). The views expressed in this article are those of the author and not those of the FAAA. The FAAA does not endorse or otherwise assume responsibility for any financial product advice which may be contained in the article. Nor does it endorse or assume responsibility for the information.
